2010 Full Year Results

RNS Number : 2340C

The Vitec Group PLC

03 March 2011

 



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

3 March 2011

The Vitec Group plc

2010 Full Year Results

Investing for growth in our three markets

The Vitec Group plc ("Vitec"), the international provider of products and services for the broadcast, photographic, and MAG (military, aerospace and government) markets, announces its full year audited results for the year ended 31 December 2010.

Results	2010	2009	% Change	% Change
				Organic CER**
Revenue	£309.6m	£315.1m	-2	+4
Before significant items*
Operating profit	£27.7m	£24.5m	+13	+3
Profit before tax	£26.7m	£22.7m	+18	+7
Basic earnings per share	41.9p	36.5p	+15	+4
After significant items*
Operating profit	£22.6m	£2.9m	+679
Profit before tax	£21.7m	£1.8m	+1106
Basic earnings per share	42.8p	7.5p	+471
Free cash flow+	£18.0m	£22.7m	-21
Net debt	£28.1m	£40.6m	-31
Total dividend per share	19.0p	18.3p	+4

v Key points 

·      Broadcast and Video markets return to growth

·      Underlying organic CER revenue growth of 4.3%

·      Operating profit up 13.1% despite £7.9 million profit impact from the end of BAS contract

·      Reported PBT before significant items up by 17.6%, organic CER up 6.9%

·      IMT business focused on the MAG opportunity: Auction 66 contract wins

·      Launch of Manfrotto Powerbrand products at Photokina

·      Total dividend increased 3.8% to 19.0 pence per share; recommended final dividend of 11.4 pence per share

*Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group. 2010 significant items in operating profit total a charge of £5.1 million (2009: £21.6 million) and comprise;

·      amortisation of acquired intangibles £7.6 million (2009: £8.5 million);

·      impairment loss on property, plant and equipment £0.1 million (2009: £1.5 million);

·      profit on disposal of business £2.2 million (2009: £0.7 million loss);

·      curtailment gain on closure of the UK defined benefit pension scheme net of closure costs £2.5 million (2009: £nil);

·      exit costs on BAS relocation project £2.1 million (2009: £nil); and

·      restructuring costs £nil (2009: £10.9 million)

Significant items in profit before tax total a charge of £5.0 million (2009: £20.9 million) which is the £5.1 million analysed above less a gain of £0.1 million (2009: £0.7 million) relating to volatile financial instruments.

**Organic CER: At Constant Exchange Rates excluding year on year effect of acquisitions and disposals

+ Free cash flow: cash generated from operations in the financial year after capital expenditure, net interest and tax paid in the financial year

Commenting on the results, Stephen Bird, Group Chief Executive of Vitec, said:

"I am pleased to report a very good set of results for 2010, which show we are on track with our strategy presented in October 2009. Our established products in our key markets showed a return to growth after the difficult trading conditions of 2009.

In 2010 we laid further foundations for future growth with major product launches for Manfrotto, key contract wins in MAG, the opening of facilities in Brazil and China and the consolidation of our Imaging operations in Italy and MAG operations at IMT in New Jersey, USA into new offices.

We will continue to invest in 2011 to develop our products and services to support the Three Market Strategy of Broadcast and Video, Photographic and MAG. In particular, we will invest further in the Manfrotto Powerbrand. We continue to seek value-adding acquisitions that are consistent with our three market focus.

We are confident that the successful execution of our strategy will enable us to capitalise on the market opportunities that we have identified and deliver increased shareholder value over the coming years."

Enquiries:

The Vitec Group plc                                          

Stephen Bird, Group Chief Executive                                        Telephone: [phone]

Nick Humby, Interim Chief Financial Officer

Financial Dynamics       

Nick Hasell / Sophie Moate                                                     Telephone: [phone]

Notes

1.   This statement is based on information sourced from management estimates.

2.   Current market exchange rates as at 1 March 2011: £1 = $1.63, £1 = €1.18, €1 = $1.38.

3.   2010 average market exchange rates: £1 = $1.55, £1 = €1.17, €1 = $1.33

4.   2009 average market exchange rates: £1 = $1.56, £1 = €1.12, €1 = $1.40

5.   Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect Vitec's current expectations concerning future events and actual results may differ materially from current expectations or historical results.

6.   The Company's AGM will be held on Thursday 19 May 2011. The Annual Report and Accounts and Notice of Annual General Meeting will be posted to shareholders and available on the Company's website from 13 April 2011.

Vitec is an international Group principally serving customers in the broadcast, photographic and military, aerospace and government (MAG) markets. Listed on the London Stock Exchange with 2010 revenue of £309.6 million, Vitec is based on strong, well known, premium brands on which its customers worldwide rely. Vitec is organised in three divisions: Imaging & Staging, Videocom and Services.

Imaging & Staging designs, manufactures and distributes equipment and accessories for photography, video and events.

Videocom designs and distributes systems and products used in broadcasting and live entertainment, film and video production and MAG.

Services provides equipment rental, workflow design and technical support for camera, video, audio, fibre optic and wireless technology used by TV production teams and film crews.

More information can be found at: www.vitecgroup.com.

2010 Performance Overview

2010 saw the recovery of our core target markets from the depressed performance of 2009, the full year benefit of the cost savings initiated in 2009, and strong strategic execution of our Three Market Strategy launched in October 2009.

Revenue at organic constant exchange rate increased by 4.3%; reported revenues declined by 1.8%, to £309.6 million (2009: £315.1 million) reflecting the disposal of Clear-Com in April 2010, and IFF in 2009. Revenues were boosted by strong growth in the Photographic and Broadcast markets throughout the year which offset the expected impact of the end of the Broadcast Auxiliary Services (BAS) contract that reduced revenue in Videocom.

Reported operating profit* increased by 13.1% to £27.7 million (2009: £24.5 million), with organic growth of 3.2% at constant exchange rates. The 2009 cost saving initiatives delivered the expected annual benefit of £22 million in 2010 (2009: £17 million). The operating margin increased to 8.9% (2009: 7.8%). Reported Group PBT* increased by 17.6% to £26.7 million (2009: £22.7 million), or 6.9% in organic growth at constant exchange rates. Underlying Group Basic EPS* was up 14.8% at 41.9p (2009: 36.5p); Group Basic EPS after significant items was 42.8p (2009: 7.5p).

Cash generation was good, with free cash flow of £18.0 million (2009: £22.7 million), representing a cash flow conversion (before interest, tax and restructuring) of 93% (2009: 141%). This is after the start-up working capital investment (mainly inventories) for the Manfrotto Powerbrand, for which the first sales are due in H1 2011. Continuing working capital control resulted in a further reduction of the working capital to sales percentage to 16.2% (December 2009: 16.4%). The year also benefited from tax rebates in Germany and USA relating to prior years, reducing net tax paid to £0.9 million (2009: £4.3 million).

The Group's balance sheet has strengthened. Our Net Debt / EBITDA ratio was reduced to 0.7 times (31 December 2009 1.0 times) with Net Debt at 31 December 2010 reduced to £28.1 million (31 December 2009: £40.6 million) and drawings under our £125 million committed banking facility (which extends to August 2013) reduced to £34.8 million, or 27.8% (31 December 2009: 42.2%).

The Board has recommended a final dividend of 11.4p per share (2009: 10.9p). Subject to approval by the shareholders at the Annual General Meeting, the dividend will be paid on 20 May 2011 to shareholders on the register at the close of business on 26 April 2011. This brings the full year dividend to 19.0p (2009: 18.3p) which equates to a dividend cover of 2.2 times (2009: 2.0 times) based on basic earnings per share before significant items*.

* Before significant items. Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see accounts note 5).

Three Market Strategy Update

Our strategy is to focus on the three markets which will provide us with significant growth through the organic development of our existing capabilities and strengths supplemented where appropriate with selective acquisitions. The three markets are Broadcast and Video, Photographic, and Military, Aerospace and Government (MAG).

Broadcast & Video

Vitec has leading brands in the Broadcast & Video market. Our strategy is to maintain our premium product offerings and market share in the broadcast segment whilst developing specific products and new channels focused on the needs of the independent cameraman in the video segment.

Growth opportunities in the Broadcast & Video market will come from:

·      LED lighting (where the energy saving over traditional lighting is significant);

·      Business and industry applications for our existing products;

·      Microwave systems (outside the US using our global presence); and

·      Robotics (as video production becomes more automated).

During 2010, we have:

·      Launched Sola LED Fresnel lights, a major new product family that expands the addressable market for LEDs into major TV studios for the first time and delivers up to 95% energy savings over traditional lighting;

·      Secured a major order for HD microwave systems with a Russian sports broadcaster;

·      Developed a range of video accessories to support hybrid DSLRs and compact camcorders aimed at business and industry applications and

·      Won significant orders for the new Vinten Radamec robotics range including at Sky's Harlequin facility, West London and Alberta Parliament.

Photographic

In the Photographic market, our strategy is to maintain our premium market position among professional and hobbyist photographers whilst leveraging the Manfrotto brand to enter new faster-growing segments among non-professional users. The Camera and Imaging Products Association (CIPA), the trade association of Japanese camera manufacturers, forecasts volume growth of DSLRs in 2011 of 20% over 2010.

During 2010, we have:

·      Launched a fully integrated range of products targeted at new entry level DSLR users consisting of over 100 new products comprising supports, bags, LED lights and apparel;

·      Developed the first range of Manfrotto LED photographic lights, to be delivered in the first half of 2011;

·      Presented a full range of new Bags under both the Manfrotto and Kata brands targeted at professionals and hobbyists, as well as a new Manfrotto range aimed at the non-professional segment and the new National Geographic "Africa" range; and

·      Presented the integrated range of products to major buyers in the photographic market - traditional speciality stores, consumer electronics stores and e-tailers - with sales expected to begin in the first half of 2011.

Military, Aerospace and Government (MAG)

In the MAG market, our strategy is to leverage our microwave technology from the Broadcast market. We continue to see opportunities for our range of transmitters and receivers in military and law enforcement applications. Overall defence budgets are under pressure but demand for intelligence, surveillance and reconnaissance equipment remains a priority:   

·      In law enforcement where our products help police authorities improve their situational awareness (e.g. crowd control) and surveillance where our miniature products assist national agencies in covert operations; and

·      In military vehicles where our video technology can be used in unmanned applications to assess threats and to minimise loss of human life.

During 2010, we have:

·      Won two orders from the US Department of Justice (Auction 66) worth $10.8 million of which one third was shipped in 2010;

·      Secured further law enforcement contracts with Penn State Police and LA Sheriff's Department; and

·      Continued product development with miniaturised HD transmitters/receivers and MPEG4 video compression. 

Operational Review

Group highlights

In 2010 Vitec saw solid growth from a combination of recovery in the Photographic and Broadcast markets from 2009 and the launch of new products across the Group.

We continue to invest in our development processes to improve the time to market of new products and to invest in research, development and engineering in support of our businesses. After adjusting for capitalised expenditure of £1.5 million (2009: £0.6 million) and expenditure incurred in the disposed Clear-Com business of £0.5 million (2009: £2.4 million), research, development and engineering expenditure on a like for like basis was £10.8 million (2009: £10.7 million) representing 4% of Group product sales (2009: 4%).

In addition to strategic product and market developments, the Group expanded its global reach with the opening of our new photographic distribution businesses in Hong Kong and China and our office in Sao Paulo, Brazil, ready for the 2014 FIFA World Cup and the 2016 Olympics, bringing to 14 the number of countries where the Group has a direct presence. We have manufacturing facilities in lower labour cost countries such as Costa Rica, Slovakia and Mexico and outsourced operations in China. In total, the Group now has sales in over 100 countries.

We consolidated our IMT operations in one facility in New Jersey, USA and the non-production elements of our Imaging business into one site in Bassano, Italy.

The cost reductions implemented in 2009 yielded their full potential, delivering £22 million (2009: £17 million) of cost savings in 2010. This helped contribute to a stronger operating margin of 8.9% (2009: 7.8%) as we gained good operating leverage from the increased volume.

Consistent with our purpose to provide products and services that support the capture of exceptional images, we divested our audio business, Clear-Com to HM Electronics for consideration of approximately £8.8 million and a profit on disposal of £2.2 million.

 Imaging & Staging Division

The Imaging & Staging Division has a strong reputation with two main groups of creative professionals: photographers and videographers, who shoot commercially, independently or for pleasure and share images on-line; and also live and corporate event production and touring bands, who need versatile trussing and staging sets.

	2010	2009	r %
Revenue	£153.7m	£141.8m	8.4%
Operating Profit*	£18.9m	£17.7m	6.8%
Operating Margin*	12.3%	12.5%	-0.2pts

* Before significant items. Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see Segment reporting).

Markets

The Photographic market - the primary market for the Division - showed good signs of recovery particularly in the hobbyist and consumer segments. According to CIPA, shipments of DSLR cameras in 2010 were up 30% on 2009 at around 13 million units. Camera volume growth is being driven primarily by the consumer segment upgrading obsolete pocket camera equipment, and by the rapid growth of the Chinese market, which is expected to become the second largest after the USA.

In other markets - supports for video, lighting and cine/film applications - volumes enjoyed double digit growth recovering from the marked contraction of 2009. The live and corporate events market, where our Staging business operates, continued to feel the effects of the economic downturn, with volumes remaining in line with 2009.

Operations

Revenue for 2010 was £153.7 million, an increase of 8.4% (an increase of 9.7% in organic constant currency). Operating profit* rose 6.8% to £18.9 million (an increase of 2.3% in organic constant currency) due to positive exchange rate effects, a reduction in capacity and cost containment across the businesses partially offset by the investment in the launch of the Manfrotto Powerbrand.

Our Supports business reported a 9% growth in sales underpinned by new products developed during 2009. During the year a new range of supports for the non-professional photographer was developed and launched at Photokina in September 2010. These were supplemented by the addition of new product families under the Manfrotto brand in photo bags, LED lights and apparel. In 2011, we will invest to support the distribution of these products through consumer retail channels.

In addition the Bags business benefited from growth in the Kata and National Geographic collections with sales up 20% in constant currency. Manfrotto Distribution reported solid growth with improved performance in the US and Japan.

In Staging, the live event market remained flat compared with 2009. We therefore undertook a further business review which resulted in the move of more production to Slovakia and re-organisation of the business unit under one managing director. The business is now well-placed to benefit from recovery.

Key achievements

·      Completed the new Manfrotto Powerbrand proposition and communication campaign;

·      Further penetrated the fast-growing consumer electronic and e-tailing channels, including the implementation of a new web platform;

·      Opened two new Manfrotto Distribution subsidiaries in Shanghai and Hong Kong;

·      Completed consolidation and rationalisation of our supports manufacturing plants in Feltre, Italy;

·      Manfrotto joysticks won the CIPA award for best 2010 photo accessory; and

·      Kata's Bumblebee Ultra Light camera bag won the "Entertainment Technology and Cameras" category (reddot) award for design.

Videocom Division

Our Videocom Division specialises in the design and distribution of high-quality equipment principally for professionals engaged in producing and transporting video content for the global media industries - broadcast, film, live events and education. More recently, our mission-critical visual communication and surveillance products have successfully entered the military, aerospace and government (MAG) markets.

	2010	2009	r %
Revenue	£121.6m	£147.0m	-17.3%
Operating Profit*	£8.4m	£8.5m	-1.2%
Operating Margin*	6.9%	5.8%	1.1pts

* Before significant items. Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see Segment reporting).

Markets

Broadcast and film markets across all continents showed some volume recovery after a sharp decline in 2009. This was assisted by the recovery in TV advertising revenue which grew 9% globally in 2010 and is forecast to continue to grow 6% pa from 2010 until 2013. The Broadcast and Film markets were also underpinned by the continued transition to HDTV operations.

We expect the compelling return on investment benefits of LED lighting, which delivers up to 95% energy savings over traditional lighting, to be a major motivator for studios to change from their older and more inefficient lighting. Our Litepanels range is the global market leader in this technology and in 2010 saw a substantial increase in its sales to the broadcast and film industries.

The business and industry market in 2010 remained robust, driven by the growth of live entertainment, on-location shoots, corporate videos and education especially in the US.

The MAG market has seen increasing demand for video-enabled intelligence in both law enforcement and military unmanned vehicles and the demand for IMT's market leading technology remains good, despite well-publicised reductions in defence expenditure globally.

Operations

Revenue for 2010 was £121.6 million, a decrease of 17.3%, or 6.6% in organic constant currency after adjusting for the disposal of Clear-Com. Further excluding the effects of the end of the BAS contract at IMT of £24.1 million, underlying revenue grew by 14.5%.

The Camera Dynamics business benefited from a number of major customer orders and increased demand for our leading brands in both robotic and manual supports. Our profit from camera supports grew significantly reflecting cost saving measures undertaken in late 2008 and 2009.

Our Litepanels LED-business increased revenue by 25% underpinned by orders for the Winter Olympics in Vancouver. We secured the first sales of our Sola studio product range from CNN.

Our IMT microwave systems business revenue grew in constant currency by 10%, excluding the £24.1 million impact of the cessation of the BAS project, which had a corresponding operating profit impact of £7.9 million. This was helped predominantly by wins in the MAG market, including the Department of Justice and the US Federal Government.

Anton/Bauer had a good year, helped by the recovery in the broadcast market and the supply of batteries and chargers to the medical market.

Globally, the Group's integrated approach across our leading brands helped us achieve record revenues in China and led a strong recovery in Asia for the Videocom Division.

Key achievements

·      Major wins for IMT in the MAG market: Los Angeles County Sheriff's Department Airborne unit, Pennsylvania State Police and the US Department of Justice;

·      Vinten wins major orders with Sky (in the UK and in Italy) and was recognised with the Queen's award for its continuous innovation;

·      Vinten Radamec won leading robotics deals with its Fusion product range;

·      An HD wireless camera systems order for ANO Sports Broadcasting in Russia;

·      The opening of the Brazil office and a new facility for our IMT business in New Jersey; and

·      Anton/Bauer wins major orders in the medical market including Yale-New Haven hospital in Connecticut.

Services Division

Our Services Division provides the highest quality broadcast equipment and engineering support for the most demanding broadcast and media productions. In 2010 it provided solutions for events ranging from the XXI Winter Olympic Games, the G8 Summit, the inaugural Youth Games and numerous top entertainment and awards shows. Its capabilities with broadcast, fibre optics, wireless audio and other technologies makes it a complete one-stop facility for top producers around the globe.

	2010	2009	r %
Revenue	£34.3m	£26.3m	30.4%
Operating Profit*	£0.4m	(£1.7m)	n/m
Operating Margin*	1.2%	(6.5%)	7.7pts

* Before significant items. Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see Segment reporting).

Markets

2010 was a year of recovery for the broadcast sports and entertainment marketplace. The XXI Winter Olympic Games, FIFA World Cup and other major entertainment and political events helped the rebound from lower levels of expenditure in 2009. The major broadcasters also continued to adopt high definition formats for the coverage of live events.

In addition, the emergence of a fledgling 3D television industry offered opportunities for experimentation at major events like the All-Star Baseball game, US Open Tennis Tournament, NASCAR racing and NHL Hockey.

Operations

Revenue for 2010 was £34.3 million, up 30.4% (29.4% in constant currency). Increases in broadcast advertising revenues helped fuel demand for broader and more sophisticated coverage of global events, creating an increased demand for broadcast kit at the venue.

Operationally, several departments were reorganised under fewer executives to provide efficiencies in sales, operations and engineering.

2010 also saw the launch of the Vitec Ambassador Program, a series of events designed to expose producers to the broad range of Vitec products from across all business units and divisions. The program resulted in follow-on sales for other Group brands such as Litepanels and IMT.

Key Achievements

·      Successful provision of the largest Olympic initiative in the division's history with the Winter Games. Facilities were provided for the host broadcaster (OBS) and also over a dozen other US and European broadcasters;

·      Negotiation and execution of an exclusive multi-year agreement with Panasonic to provide 3D television services for a wide range of events;

·      Completion of key additional exclusive distributor agreements for broadcast accessories and specialty manufacturers that provide a one-stop offering for our largest customers;

·      The Ambassador Program resulted in Litepanels being selected by virtually all American football broadcasters for use in their on-air commentary booths; and

·      Bexel, in partnership with Snohetta, the Norwegian architectural firm, was selected by the City of New York to provide consulting and broadcast infrastructure services for a multi-year project designed to create a massive live-event venue in Times Square.

Financial Review

Revenue 

Revenue decreased by £5.5 million to £309.6 million, a decline of 1.7% in the year. After adjusting for £1.2 million (0.2%) of adverse foreign exchange, the £17.0 million (6.2%) impact of disposals and the £24.1 million (8.8%) impact of the end of the BAS contract, there was a £36.8 million (13.5%) increase in organic constant currency revenue. Management estimate that revenue in Videocom benefitted from £5 million of broadcast projects deferred from 2009.

Operating profit 

The table below sets out an analysis of the factors increasing operating profit, before significant items*, between 2009 and 2010. The variances are based on management's best estimates and are not a statutory presentation.

Operating profit before significant items*                   2009-10 Variance Analysis (£m)
2009 Operating profit*		24.5
Gross margin effects:
- Volume, mix and efficiency	14.7
- BAS contract	(7.9)
- Sales price less cost inflation	1.1
Operating expenses	(7.1)
		0.8
Acquisitions/disposal		0.7
Foreign exchange effects:
- Translation	(0.3)
- Transaction after hedging	2.0
		1.7
2010 Operating profit*		27.7

* Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see accounts note 5).

Operating profit before significant items* was £27.7 million, 13.1% higher than 2009. The Group's operating profit margin increased from 7.8% to 8.9%, reflecting the volume improvements and cost reductions actioned in 2009. Before beneficial foreign currency effects of £1.7 million over the year, the increase in operating profit* was 6.2%, 3.2% in organic CER.

Profit before tax and significant items* was £26.7 million, up from £22.7 million in 2009. Adjusted earnings per share before significant items* was 41.9p (2009: 36.5p).

Net financial expense

Net financial expense before significant items* totalled £1.0 million (2009: £1.8 million) and decreased principally because of low interest rates and lower levels of borrowing across the year.

Taxation

The effective taxation rate on operating profit after net finance expense but before significant items* was 33% (2009: 32%). The Group's tax charge is higher than the UK statutory rate because the majority of its profits arise in overseas jurisdictions with higher tax rates.

Significant items

In 2010 these included a £2.1 million cost (2009: £nil) in relation to the exit from the Broadcast Auxiliary Services (BAS) relocation project (of which £1.3 million was in cost of goods sold), a £2.5 million gain (2009: £nil) for the curtailment of the UK defined benefit pension scheme (net of costs of closure) and £0.1 million impairment loss on property (2009: £1.5 million). In 2009 significant items also included restructuring costs of £10.9 million.

There was a £2.2 million gain on disposal of the Clear-Com business (2009: loss of £0.7 million on disposal of IFF).

The amortisation of acquired intangibles decreased to £7.6 million (2009: £8.5 million) mainly due to the intangibles acquired with IMT being fully amortised by the end of H1 2010. The annual impairment review of goodwill led to no impairment charge in 2010 (2009: £nil).

Finance income included in significant items* consisted of a £0.1 million gain (2009: £0.7 million gain) due to currency movements on loans not accounted for as net investment hedges.

The tax credit of £5.4 million (2009: £8.6 million) relates mainly to current year tax refunds (£3.2 million), the capitalisation of tax losses not previously recognised (£1.9 million) and effect of other items classified as significant (£0.3 million).

Acquisitions / Disposal

There were no acquisitions in 2010 or 2009 but there were earn out payments relating to acquisitions made in prior years of £2.6 million (2009: £3.0 million). The payments in 2010 related to Litepanels.

Clear-Com disposal

On 1 April 2010, Vitec sold its Clear-Com business to HM Electronics Inc. for a cash consideration of approximately £8.8 million. £8.0 million was received in cash at completion. Subsequently further cash of £0.4 million has been received arising from changes in working capital. Consideration of approximately £0.4 million is due in 2011, based on the actual turnover achieved during 2010. Receipts from the sale have been used to pay down borrowings and to invest in Vitec's future development. 

The gross assets disposed of at the date of sale amounted to £10.0 million (net assets £5.9 million). A profit on disposal of £2.2 million before tax and £4.2 million after tax is recorded in significant items in the Income Statement, including the further potential consideration of £0.4 million.

The sale of Clear-Com represents an important strategic move for the Group, as we focus on opportunities in our chosen core markets.

Cash flow and net debt 

Cash generated from operations was strong at £34.6 million (2009: £42.8 million). The reduction compared with 2009 arises from increases in inventory and receivables in the last quarter as a result of higher revenue and inventory build up to fulfil new product orders. Working capital management remains a key focus.

Working capital (Q4 average inventory, trade and other receivables, trade and other payables, derivative financial instruments and current provisions) decreased as a percentage of annualised Q4 revenue to 16.2% (2009: 16.4%) due largely to tighter control.

Inventory rose £3.5 million to £55.4 million at the year-end, reflecting higher activity and holding levels; inventory days increased to 104 (2009: 97 days). Trade receivables decreased to £34.9 million as at the year end (2009: £35.0 million) and debtor days improved to 39 (2009: 41 days). Creditor days also improved to 44 (2009: 41 days). Inventory, debtor and creditor days are stated in constant currency at year-end exchange rates; inventory and creditor days are based on Q4 cost of sales (excluding exchange gains/losses) while debtor days are based on Q4 revenue.

The £10.9 million 2009 cost reduction programme resulted in cash outflows of £4.4 million (2009: £5.5 million). The remainder will be spent in 2011 and beyond.

Capital expenditure, including capitalised development costs, totalled £16.5 million (2009: £15.3 million), of which £3.8 million (2009: £7.2 million) related to rental assets, partly financed by the proceeds from rental asset disposals of £1.4 million (2009: £1.5 million).

Tax paid in 2010 of £0.9 million was significantly lower than 2009 (£4.3 million), mainly due to the tax refunds in Germany and USA.

Free cash flow decreased to £18.0 million reflecting the investments in working capital and increased capex which was partially offset by lower interest and tax payments.

The Group's strong free cash flow, together with adverse exchange movements on net debt of £1.7 million (2009: £0.1 million) resulted in a further decrease in Net Debt to £28.1 million (2009: £40.6 million).

Treasury

Financing, currency hedging and tax planning are managed centrally. Hedging activities are designed to protect profits, not to speculate. Any substantial changes which are planned to the financial structure of the Group, or to its treasury practice, are first referred to the Board for approval. The Group operates strict controls over all treasury transactions involving dual signatures and appropriate authorisation limits. 

As in previous years, a portion of the transactions of subsidiaries in foreign currencies is hedged, with the US dollar contracts as at 31 December 2010 set out below. 

Currency	December	Average	December	Average
	2010	rate	2009	rate
US dollars sold for Euros
Forward contracts	$33.7m	1.37	$29.3m	1.37
Options	$nil	n/a	$7.3m	1.45
US dollars sold for Sterling
Forward contracts	$20.6m	1.55	$29.9m	1.59

The Group does not hedge the translation of its foreign currency profits. A proportion of the Group's foreign currency net assets are hedged using normal Group borrowings and forward contracts.

Financing activities 

The Group's principal financing facility is a five-year £125 million committed multicurrency revolving current loan agreement involving five banks, expiring on 8 August 2013. At the end of December 2010 £34.8 million (2009: £52.7million) of the facility was utilised.

The average cost of borrowing for the year was 1.3% (2009: 1.4%) reflecting the continued low level of interest rates. Net interest cost (consisting of net interest payable and commitment fees) was £1.2 million (2009: £1.6 million), reflecting lower interest rates and lower debt over the year. Net interest cover (using operating profit before significant items*) remained high at 23 times (2009: 15 times). 

With regard to the management of capital, the Group's primary objective is to ensure its continuance as a going concern. In respect of gearing, the Board seeks to maintain an efficient capital structure without exposing the Group to unnecessary levels of risk; the Group has operated comfortably within its loan covenants during 2010. The Board believes the current capital structure is appropriate for the Group, bearing in mind its current strong cash generation, dividend policy and its typical ongoing level of acquisition activity. The Board will continue to look for alternative long term debt facilities to complement its existing facilities, which, if implemented, would marginally increase the annual interest cost.

Foreign Exchange

2010 operating profit benefitted from a £1.7 million favourable foreign exchange effect. The average £/$ and Euro/$ exchange rates were favourable compared to 2009 which, together with favourable £/$ and Euro/$ hedging contracts, gave rise to the gain.

UK pensions

Following consultation with active members and the scheme trustee, on 31 July 2010 the Group closed its UK defined benefit pension scheme, the Vitec Group Pension scheme, to future accrual.

The closure of the scheme gave rise to the curtailment gain of £3.0 million in accordance with IFRS accounting standards and costs of closure of £0.5 million which are reflected in the significant items in the Income Statement

Post balance sheet events

Richard Cotton, previously Group Finance Director, ceased to be a director on 4 February 2011.

Dividend

The directors have recommended a final dividend of 11.4 pence per share amounting to £4.9 million (2009: 10.9 pence, amounting to £4.6 million). The dividend will be paid on 20 May 2011 to shareholders on the register at the close of business on 26 April 2011. This will bring the total dividend for the year to 19.0 pence per share (up 3.8 %).

Dividend Reinvestment plan

The Company has a Dividend Reinvestment Plan that allows shareholders to reinvest dividends to purchase additional shares in the Company. For shareholders to apply the proceeds of this and future dividends to the plan, application forms must be received by the Company's Registrar by no later than 26 April 2011. Existing participants in the plan will automatically have the final dividend reinvested. Details on the plan can be obtained from Capita Registrars at www.capitaregistrars.com .

Principal Risks and Uncertainties

US market

50% of 2010 revenue was from the Americas, principally the USA, so the Group remains susceptible to any major deterioration in demand for its products and services from US customers. It is difficult to mitigate this risk but the Group seeks to reduce its dependence on the US by actively widening its sales and distribution activities, particularly into Asia.

Foreign exchange

The great majority of the Group's profit is earned in overseas currencies and is therefore subject to translation risk if sterling strengthens. To mitigate this, a proportion of the Group's foreign currency net assets are hedged using normal Group borrowings and forward contracts. 

In addition, many of the Group's businesses sell worldwide from various countries of manufacture, so the Group is subject to transaction risk, particularly that of a weaker US dollar. The Group partially hedges its major foreign exchange receipts by selling currency 12-18 months forward on a rolling basis. In addition the Group seeks to outsource the manufacture of parts, where appropriate, to low-cost countries, whose currencies are frequently either dollar-denominated or linked to the dollar.

Markets

The Group's two broadcast divisions are at risk from a reduction in the capital expenditure requirements of its broadcast customers and, in the US, their rental requirements. This dependence is changing as broadcasting moves from TV to delivery by other modes such as internet and mobile services. To mitigate this, the Group markets its products and services to all of these producers of broadcast video material, as well as to the religious, corporate and government sectors. 

Imaging products are principally used by both professionals and hobbyists. Whilst sales of cameras are forecast to continue to grow, there is a risk that recessionary conditions may lead to adverse sales pressures in these markets.

Low-cost competition

The Group is at risk from low-cost competitors who may sell similar products at lower prices, particularly for higher volume items such as the simpler photographic tripods. While the Group also sources those cheaper products from lower-cost countries, it combats this threat by patenting its technologies wherever possible and taking action against any infringement, continuously innovating its products and employing its significant marketing and distribution capabilities.

Strategy

The business growth opportunities outlined in the strategic direction communicated by the Group in October 2009 are based on market research commissioned by the Group with external experts. There is the risk that the sampling data used in this research is unrepresentative of the population. Success with the MAG strategy is significantly dependent on continuing government funding in the targeted areas. In both the photographic and MAG strategies there is execution risk in successful delivery of appropriate products to the market.

Cautionary statement

This announcement contains forward looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries and sectors in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated.

Summary and Outlook

In 2010 we laid further foundations for future growth with major product launches for Manfrotto, key contract wins in MAG, the opening of facilities in Brazil and China and the consolidation of our Imaging operations in Italy and MAG Operations in New Jersey, USA into new offices.

We will continue to invest in 2011 to develop our products and services to support the Three Market Strategy of Broadcast and Video, Photographic and MAG. In particular, we will invest further in the Manfrotto Powerbrand. We continue to seek value-adding acquisitions that are consistent with our three market focus.

We are confident that the successful execution of our strategy will enable us to capitalise on the market opportunities that we have identified and deliver increased shareholder value over the coming years.

Michael Harper                                                  Stephen Bird

Chairman                                                          Group Chief Executive

Consolidated Income Statement

For the year ended 31 December 2010

		2010									2009
		Before significant items					Significant items (1)			Total	Before significant items	Significant items (1)	Total
		£m					£m			£m	£m	£m	£m
Revenue		309.6								309.6	315.1		315.1
Cost of sales		(183.1)					(1.3)			(184.4)	(191.2)		(191.2)
Gross profit		126.5					(1.3)			125.2	123.9		123.9
Other operating income		-					5.2			5.2	-	-	-
Operating expenses		(98.8)					(9.0)			(107.8)	(99.4)	(21.6)	(121.0)
Operating profit /(loss)		27.7					(5.1)			22.6	24.5	(21.6)	2.9
Finance income		3.1					0.1			3.2	2.4	0.3	2.7
Finance costs		(4.1)					-			(4.1)	(4.2)	0.4	(3.8)
Net finance expense		(1.0)					0.1			(0.9)	(1.8)	0.7	(1.1)
Profit/(loss) before tax		26.7					(5.0)			21.7	22.7	(20.9)	1.8
Taxation		(8.8)					5.4			(3.4)	(7.2)	8.6	1.4
Profit/(loss) for the year attributable to owners of the parent		17.9					0.4			18.3	15.5	(12.3)	3.2
Earnings per share
Basic earnings per share										42.8p			7.5p
Diluted earnings per share										41.9p			7.4p
Dividends per ordinary share
Prior year final paid 10.9p										£4.6m
Current year interim paid 7.6p										£3.3m
Current year final proposed 11.4p										£4.9m
(1) See Note 5

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2010

		2010	2009
		£m	£m
Profit for the year		18.3	3.2
Other comprehensive income
Actuarial gain/(loss) on pension obligations, net of tax		2.5	(6.1)
Currency translation differences on foreign currency subsidiaries		1.5	(20.8)
Net (loss)/gain on designated effective net investment hedges		(1.1)	4.0
Amounts released to Income Statement in relation to cash flow hedges, net of tax		(0.7)	3.4
Effective portion of changes in fair value of cash flow hedges		-	0.9
Other comprehensive income for the year net of tax		2.2	(18.6)
Total comprehensive income for the year attributable to owners of the parent		20.5	(15.4)

Consolidated Balance Sheet

As at 31 December 2010

		2010	2009
		£m	£m
Assets
Non-current assets
Intangible assets		51.8	58.2
Property, plant and equipment		53.4	54.6
Trade and other receivables		0.4	0.3
Deferred tax assets		22.6	18.1
		128.2	131.2
Current assets
Inventories		55.4	51.9
Trade and other receivables		45.4	45.5
Derivative financial instruments		0.9	1.7
Current tax assets		0.3	-
Cash and cash equivalents		7.7	12.1
		109.7	111.2
Total assets		237.9	242.4
Liabilities
Current liabilities
Bank overdrafts		1.0	-
Trade and other payables		51.2	46.6
Derivative financial instruments		1.0	0.3
Current tax liabilities		9.4	6.6
Provisions		4.6	8.6
		67.2	62.1
Non-current liabilities
Bank loans		34.8	52.7
Post-employment obligations		7.0	11.0
Provisions		2.2	4.4
Deferred tax liabilities		2.4	1.0
		46.4	69.1
Total liabilities		113.6	131.2
Net assets		124.3	111.2
Equity
Share capital		8.6	8.6
Share premium		9.6	9.0
Translation reserve		5.9	5.5
Capital redemption reserve		1.6	1.6
Cash flow hedging reserve		(0.1)	0.6
Retained earnings		98.7	85.9
Total equity		124.3	111.2

Consolidated Statement of Changes in Equity

As at 31 December 2010

	Share capital	Share premium	Translation reserve	Capital redemption reserve	Cash flow hedging reserve	Retained earnings	Total equity
	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2009	8.5	7.5	22.3	1.6	(3.7)	97.2	133.4
Total comprehensive income for the year
Profit for the year	-	-	-	-	-	3.2	3.2
Other comprehensive income
Actuarial loss on pension obligations, net of tax	-	-	-	-	-	(6.1)	(6.1)
Currency translation differences on foreign currency subsidiaries	-	-	(20.8)	-	-	-	(20.8)
Net gain on designated effective net investment hedges	-	-	4.0	-	-	-	4.0
Amounts released to Income Statement in relation to cash flow hedges, net of tax	-	-	-	-	3.4	-	3.4
Effective portion of changes in fair value of cash flow hedges	-	-	-	-	0.9	-	0.9
Total other comprehensive income net of tax	-	-	(16.8)	-	4.3	(6.1)	(18.6)
Total comprehensive income for the year	-	-	(16.8)	-	4.3	(2.9)	(15.4)
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Dividends paid	-	-	-	-	-	(7.8)	(7.8)
Own shares (Treasury) purchased	-	0.7	-	-	-	(0.7)	-
Own shares (Employee benefit trust) purchased	-	-	-	-	-	(0.6)	(0.6)
Equity-settled transactions	-	-	-	-	-	0.7	0.7
New shares issued	0.1	0.8	-	-	-	-	0.9
Total transactions with owners	0.1	1.5	-	-	-	(8.4)	(6.8)
Balance at 31 December 2009	8.6	9.0	5.5	1.6	0.6	85.9	111.2
Balance at 1 January 2010	8.6	9.0	5.5	1.6	0.6	85.9	111.2
Total comprehensive income for the year
Profit for the year	-	-	-	-	-	18.3	18.3
Other comprehensive income
Actuarial gain on pension obligations, net of tax	-	-	-	-	-	2.5	2.5
Currency translation differences on foreign currency subsidiaries	-	-	1.5	-	-	-	1.5
Net loss on designated effective net investment hedges	-	-	(1.1)	-	-	-	(1.1)
Amounts released to Income Statement in relation to cash flow hedges, net of tax	-	-	-	-	(0.7)	-	(0.7)
Total other comprehensive income net of tax	-	-	0.4	-	(0.7)	2.5	2.2
Total comprehensive income for the year	-	-	0.4	-	(0.7)	20.8	20.5
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Dividends paid	-	-	-	-	-	(7.9)	(7.9)
Own shares (Employee benefit trust) purchased	-	-	-	-	-	(1.1)	(1.1)
Equity-settled transactions	-	-	-	-	-	1.0	1.0
New shares issued	-	0.6	-	-	-	-	0.6
Total transactions with owners	-	0.6	-	-	-	(8.0)	(7.4)
Balance at 31 December 2010	8.6	9.6	5.9	1.6	(0.1)	98.7	124.3

Consolidated Statement of Cash Flows

For the half year ended 31 December 2010

					2010	2009
					£m	£m
Cash flows from operating activities
Profit for the year					18.3	3.2
Adjustments for:
	Taxation				3.4	(1.4)
	(Profit)/Loss on disposal of business				(2.2)	0.7
	Depreciation				13.6	14.3
	Impairment losses on property, plant & equipment				0.1	2.5
	Impairment losses on intangible assets				0.1	-
	Amortisation of acquired intangible assets				7.6	8.5
	Amortisation of capitalised software and development costs				1.4	1.3
	Net gain on disposal of property, plant and equipment				(1.3)	(1.0)
	Net loss on disposal of capitalised software				0.2	-
	Curtailment gain on UK Defined benefit pension scheme				(3.0)	-
	Fair value (gains)/losses on derivative financial instruments				0.3	(0.6)
	Cost of equity-settled employee share schemes				1.0	1.4
	Financial income				(3.2)	(2.7)
	Financial expense				4.1	3.8
Operating profit before changes in working capital and provisions					40.4	30.0
(Increase)/decrease in inventories					(6.9)	16.6
(Increase)/decrease in receivables					(2.6)	10.3
Increase/(decrease) in payables					7.7	(19.6)
(Decrease)/increase in provisions					(4.0)	5.5
Cash generated from operating activities					34.6	42.8
Interest paid					(1.2)	(2.1)
Tax paid					(0.9)	(4.3)
Net cash from operating activities					32.5	36.4
Cash flows from investing activities
Proceeds from sale of property, plant and equipment					2.0	1.6
Purchase of property, plant and equipment					(13.8)	(13.6)
Capitalisation of intangible assets					(2.7)	(1.7)
Contingent consideration on acquisition of subsidiaries					(2.5)	(3.0)
Disposal of business					7.1	0.7
Net cash used in investing activities					(9.9)	(16.0)
Cash flows from financing activities
Proceeds from the issue of shares					0.6	0.5
Purchase of own shares by Employee Benefit Trust					(1.1)	(0.6)
Repayment of bank loans and other borrowings					(19.0)	(11.2)
Dividends paid					(7.9)	(7.8)
Net cash used in financing activities					(27.4)	(19.1)
(Decrease)/increase in cash and cash equivalents					(4.8)	1.3
Cash and cash equivalents at 1 January					12.1	14.9
Effect of exchange rate fluctuations on cash held					(0.6)	(4.1)
Cash and cash equivalents at 31 December					6.7	12.1

Segment reporting

Reportable segments

	Imaging & Staging		Videocom		Services		Corporate and unallocated		Consolidated
	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Revenue from external customers:
Sales	153.7	141.8	121.3	145.1	7.2	6.1	-	-	282.2	293.0
Services	-	-	0.3	1.9	27.1	20.2	-	-	27.4	22.1
Total revenue from external customers	153.7	141.8	121.6	147.0	34.3	26.3	-	-	309.6	315.1
Inter-segment revenue (1)	0.4	0.7	2.9	3.4	0.2	-	(3.5)	(4.1)	-	-
Total revenue	154.1	142.5	124.5	150.4	34.5	26.3	(3.5)	(4.1)	309.6	315.1
Operating profit before significant items	18.9	17.7	8.4	8.5	0.4	(1.7)	-	-	27.7	24.5
Profit/(Loss) on disposal of business	-	(0.7)	2.2	-	-	-	-	-	2.2	(0.7)
Curtailment gain on UK Defined benefit pension scheme	-	-	3.0	-	-	-	-	-	3.0	-
Costs associated with UK Defined benefit  pension scheme closure to future accrual	-	-	(0.5)	-	-	-	-	-	(0.5)	-
Exit costs on Broadcast Auxiliary Services (BAS) relocation project	-	-	(2.1)	-	-	-	-	-	(2.1)	-
Impairment losses on property	(0.1)	(1.5)	-	-	-	-	-	-	(0.1)	(1.5)
Restructuring costs	-	(2.3)	-	(8.2)	-	(0.4)	-	-	-	(10.9)
Amortisation of acquired intangible assets	(2.5)	(0.8)	(5.1)	(7.7)	-	-	-	-	(7.6)	(8.5)
Segment result	16.3	12.4	5.9	(7.4)	0.4	(2.1)	-	-	22.6	2.9
Net finance costs									(0.9)	(1.1)
Taxation									(3.4)	1.4
Profit for the year									18.3	3.2
Segment assets	92.8	84.0	90.6	102.2	23.0	24.7	0.9	1.3	207.3	212.2
Unallocated assets
Cash and cash equivalents							7.7	12.1	7.7	12.1
Current tax assets							0.3	-	0.3	-
Deferred tax assets							22.6	18.1	22.6	18.1
Total assets									237.9	242.4
Segment liabilities	30.4	25.2	29.2	40.7	1.9	2.1	4.5	2.9	66.0	70.9
Unallocated liabilities
Bank overdrafts							1.0	-	1.0	-
Bank loans							34.8	52.7	34.8	52.7
Current tax liabilities							9.4	6.6	9.4	6.6
Deferred tax liabilities							2.4	1.0	2.4	1.0
Total liabilities									113.6	131.2
Cash flows from operating activities	15.6	19.3	4.2	6.0	4.2	4.7	8.5	6.4	32.5	36.4
Cash flows from investing activities	(7.5)	(5.1)	-	(4.1)	(2.4)	(5.7)	-	(1.1)	(9.9)	(16.0)
Cash flows from financing activities	-	-	-	(2.8)	-	-	(27.4)	(16.3)	(27.4)	(19.1)
Capital expenditure
Property, plant and equipment	6.7	4.1	3.4	2.3	3.7	7.2	-	-	13.8	13.6
Intangible assets	1.1	1.0	1.5	0.7	0.1	-	-	-	2.7	1.7

⁽¹⁾ Inter-segment pricing is determined on an arm's length basis.

Segment reporting

Information about geographical areas

	United Kingdom		The rest of Europe		The Americas		The rest of the World		Corporate and Unallocated		Consolidated
	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Revenue from external customers:
by location of customer	22.8	21.6	72.8	74.9	154.0	167.1	60.0	51.5	-	-	309.6	315.1
Segment assets	28.8	31.5	58.2	52.1	99.0	108.9	20.4	18.4	0.9	1.3	207.3	212.2
Unallocated assets
Cash and cash equivalents									7.7	12.1	7.7	12.1
Current tax assets									0.3	-	0.3	-
Deferred tax assets									22.6	18.1	22.6	18.1
Total assets											237.9	242.4
Cash flows from operating activities	4.7	8.2	15.0	14.7	3.1	5.4	1.2	1.7	8.5	6.4	32.5	36.4
Cash flows from investing activities	(1.4)	(1.0)	(6.9)	(3.5)	(0.9)	(10.1)	(0.7)	(0.3)	-	(1.1)	(9.9)	(16.0)
Cash flows from financing activities	-	-	-	-	-	(2.8)	-	-	(27.4)	(16.3)	(27.4)	(19.1)
Capital expenditure (including assets acquired within acquisitions)
Property, plant and equipment	0.6	0.7	6.1	4.0	6.5	8.7	0.6	0.2	-	-	13.8	13.6
Intangible assets	0.5	0.1	0.8	0.5	1.2	0.9	0.2	0.2	-	-	2.7	1.7

1.   Accounting policies

Basis of preparation and statement of compliance

These financial statements have been prepared in accordance with EU endorsed International Financial Reporting Standards (IFRS), International Financial Reporting Interpretations Committee (IFRICs) and the Companies Act 2006 applicable to companies reporting under IFRS.

The financial information set out herein does not constitute the Company's statutory accounts for the year ended 31 December 2010 but is derived from those accounts and the accompanying directors' report.  Statutory Accounts for 2010 will be delivered to the Registrar of Companies in due course.  The auditors have reported on those accounts; their report was unqualified and did not contain statements under Section 495 (4)(b) of the Companies Act 2006.

The comparative figures for the year ended 31 December 2009 do not constitute statutory accounts for the purpose of section 435 of the Companies Act 2006. The auditors have reported on the 2009 accounts, and these have been filed with the Registrar of Companies; their report was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis, and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Change in Accounting Policies

The following amendments to published standards and interpretations are effective for the Group for the year ended 31 December 2010:

-    IFRS 3 (revised 2008), Business Combinations;

-    Amendment to IAS 27, Consolidated and Separate Financial Statements;

-    Amendment to IAS 39, Financial Instruments: Recognition and Measurement: Eligible Hedged Items;

-    Amendment to IFRS 2, Share-based Payment: Group Cash-settled Share-based Payment Transactions;

-    Improvements to IFRSs 2009;

The Group has reviewed the effect of these amendments and interpretations, and has concluded that they have no material impact on these consolidated financial statements.

2.   Basis of Segmentation

Segmental data in this statement is analysed on the basis of the divisional management structure (Imaging & Staging, Videocom and Services) that the Group operates under.

3.   Earnings per share

Basic earnings per share of 42.8 pence (2009: 7.5 pence) is based on profit for the year attributable to equity shareholders of £18.3 million (2009: £3.2 million) and the weighted average number of shares of 42,754,835 (2009: 42,483,776). Basic earnings per share before significant items of 41.9 pence (2009: 36.5 pence) is based on profit for the year attributable to equity shareholders but before the impact of significant items of £17.9 million (2009: £15.5 million).

4.   Dividend

A final dividend of 11.4 pence per share has been recommended by the directors. This will cost £4.9 million (2009: 10.9 pence per share costing £4.6 million).

The dividend will be paid on 20 May 2011 to shareholders on the register at the close of business on 26 April 2011. The Company has a Dividend Reinvestment Plan that allows shareholders to reinvest dividends to purchase additional shares in the Company. For shareholders to apply the proceeds of this and future dividends to the plan, application forms must be received by the Company's Registrars by no later than 26 April 2011. Existing participants in the Plan will automatically have the recommended final dividend reinvested.  Details on the Plan can be obtained from Capita Registrars on 0871 664 0381 or at www.capitaregistrars.com. Calls cost 10p per minute plus network extras, lines are open 8.30am-5.30pm Mon-Fri.

5.   Significant items

Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group and in making projections of future results.
Significant items comprise the following:
		2010	2009
		£m	£m
(a) Cost of sales		(1.3)	-
£1.3 million of exit costs relating to the Broadcast Auxiliary Services (BAS) relocation project were included in cost of sales.
(b)  Other operating income
Profit on disposal of business		2.2	-
Curtailment gain on UK Defined benefit scheme		3.0	-
		5.2	(0.7)
(c)  Operating expenses
Loss on disposal of business		-	(0.7)
Costs associated with UK Defined benefit pension scheme closure to future accrual		(0.5)	-
Exit costs on Broadcast Auxiliary Services (BAS) relocation project		(0.8)	-
Impairment loss on property		(0.1)	(1.5)
Restructuring costs		-	(10.9)
Amortisation of acquired intangible assets		(7.6)	(8.5)
		(9.0)	(20.9)
On 1 April 2010, the Group sold its Clear-Com business, giving rise to a profit of £2.2 million. On 27 March 2009, the Group sold the IFF Staging business which gave rise to a loss of £0.7 million.
The closure of the UK Defined benefit pension scheme to future accrual in July 2010 gave rise to a curtailment gain of £3.0 million (2009: £nil) and closure costs of £0.5 million (2009: £nil).
£0.8 million of exit costs were incurred relating to the Broadcast Auxiliary Services (BAS) Relocation Project.
An impairment loss on property of £0.1 million (2009: £1.5 million) arose in the Imaging & Staging division.
In 2009, restructuring costs of £10.9 million comprised £2.3 million within Imaging & Staging division, £8.2 million within Videocom division, and £0.4 million within Services division. These costs related to actions implemented or committed across all divisions in response to the severe downturn in market conditions.
(d) Finance income
Currency translation gains		0.1	0.3
Net fair value gains on financial instruments		-	0.4
		0.1	0.7
The currency translation differences which arise on certain intra-Group funding balances that do not meet the strict criteria for net investment hedging, but are very similar in nature, are recorded in significant items within finance income.
The Group uses options as part of its hedging of future foreign exchange cash flows. As such options are held to maturity, the ultimate net amount charged to the income statement in respect of any option will always equate to the initial premium paid for that option. However, as a result of the time value of such options being marked to market at each balance sheet date, volatile income and expenses can be introduced between periods and such amounts are therefore identified as significant finance income or expense.
(e)  Taxation
Current tax credit		4.2	3.1
Deferred tax credit		1.2	5.5
		5.4	8.6
The current tax credit of £4.2 million comprises mainly of tax refunds of £4.3 million (£2.3 million in Germany and £2.0 million in the US). £1.8m of the £2.3 million receipt in Germany arose due to a recalculation, by the German tax authorities, of the tax liabilities arising in respect of the operations of Camera Dynamics Limited in Germany. An additional £0.5 million was received from a decrease in the tax rate to 30% applied to the partnership operation of CD Limited in Germany. The £2.0 million tax refund in the US was received as a result of the surrender of losses incurred in the US operations in 2009 into the preceding years.  £1.1m of this loss was previously recognised as a deferred tax asset in the US and thus represents a transfer from deferred to current tax.
The deferred tax credit of £1.2 million arises mainly due to: the recognition of US deferred tax assets both on intangibles and in respect of the disposal of the Clear-Com business.  This is offset by the non-recognition of US deferred tax assets due to a revision in the assessment of the recoverability of the full deferred tax asset.  Additionally deferred tax assets have been recognised in the UK, offset by the reversal of deferred tax assets from various other jurisdictions, again due to a revised assessment of the recoverability of these tax losses.

6.   Reconciliation of Decrease in Cash and Cash Equivalents to Movement in Net Debt

			2010	2009
			£m	£m
(Decrease)/increase in cash and cash equivalents			(4.8)	1.3
Net repayment of loans and other borrowings			19.0	11.2
Decrease in net debt resulting from cash flows			14.2	12.5
Effect of exchange rate fluctuations on cash held			(0.6)	(4.1)
Effect of exchange rate fluctuations on debt held			(1.1)	4.0
Effect of exchange rate fluctuations on net debt			(1.7)	(0.1)
Movements in net debt in the year			12.5	12.4
Net debt at 1 January			(40.6)	(53.0)
Net debt at 31 December			(28.1)	(40.6)
Cash and cash equivalents			7.7	12.1
Bank overdrafts			(1.0)	-
Bank loans			(34.8)	(52.7)
Net debt at 31 December			(28.1)	(40.6)

7.   UK Defined Benefit Pension Scheme

Following consultation with active members and scheme trustee, on 31 July 2010 the Group closed its UK defined benefit pension scheme, the Vitec Group Pension Scheme, to future accrual. The scheme was closed to new members in 2003, and as a result of this change, further pension accrual for the remaining 112 active members ceased as at 31 July 2010, and they became Deferred Members. The employees affected were invited to join the Group's UK Defined Contribution scheme, the Group Personal Pension Plan instead.

A triennial actuarial valuation was undertaken as at 5 April 2010. The Trustee's actuary has recently sent a draft report to the company and management is currently in discussion about the assumptions, funding position and impact on future contributions. The last actuarial valuation was undertaken as at 5 April 2007.

The Group's UK defined benefit pension liabilities under IAS 19 (amended) as at 31 December 2010 were estimated by the Group's actuaries to be £46.9 million (2009: £47.1 million) with a deficit of £2.3 million (2009: £6.1 million). The asset value has grown to £44.6 million (2009: £41.0 million).

The closure of the scheme to future accrual achieves a number of benefits for the company:

·      It removes further investment and actuarial volatility risk from the scheme funding in the future by stopping the addition of further liabilities arising from both service accrual and salary enhancement.

·      It reduces the cost of the scheme provision to the company: the employer contributions necessary to support the ongoing scheme funding were becoming prohibitive and uncompetitive.

·      It harmonises the provision of pension benefits to UK employees in an equitable way in line with market rates. 

The closure of the scheme to future accrual gave rise to a curtailment gain of £3.0 million and closure costs of £0.5 million. These are recorded in significant items in the Income Statement.

The Group employed 302 people in the UK at 31 December 2010, the majority of whom are enrolled in the Group Personal Pension Plan.

8.   Key Exchange Rates

	Weighted average		Year end
	2010	2009	2010	2009
EUR / USD	1.33	1.40	1.34	1.43
GBP / USD	1.55	1.56	1.57	1.61
GBP / EUR	1.17	1.12	1.17	1.13

 

END

 

 

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